Will It Be A Smooth Drive Or A Bumpy Road For The Automotive Industry In 2018?

The 2019 BMW X2 is pictured during the press preview at the 2018 North American International Auto Show (NAIAS) in Detroit, Michigan, on January 16, 2018. Car makers appealed to Americans' deep love of SUVs and trucks at the Detroit Auto Show, unveiling a host of choices from luxurious to utilitarian, while also beefing up the humble sedan. / AFP PHOTO / Jewel SAMAD (Photo credit should read JEWEL SAMAD/AFP/Getty Images)

There was some serious buzz in the global automotive industry in 2017. Electric Vehicles, Autonomous Driving and Digitization powered ahead, making significant transitions from pilot projects to the mainstream. The advent of flying cars, blockchain technology and new business models across the spectrum offered tantalising glimpses into the mobility experience of the future.

As the pace of change accelerates, here are my top 5 predictions for the global automotive industry in 2018:

Light Passenger Vehicles Sales Will Touch the 100 million mark

My first prediction is that in 2018 or latest by 2019, the car industry will hit a record 100 million in new car sales, three car companies will top 10 million in annual sales, and India will beat Germany to become the 4th biggest market, globally.

In 2017, initial estimates suggest 95.6 million light vehicles (below 3.5 tonnes) were sold globally, with China and US leading the pack. In 2018, Frost & Sullivan estimates 3% growth which could take the market close to 99 million sales. India is expected to outpace China in GDP growth as well as car sales growth, with the continuing recovery of the BRICS economies. The VW group, Renault-Nissan-Mitsubishi alliance and Toyota will all be selling 10 million cars this year. It will be a year of records.

The EV Juggernaut Will Roll On

My second prediction is about something that has been obvious for quite a while now: diesel is yesterday and electric is the automotive industry’s tomorrow.

Automotive emission regulations adopted by major markets have started creating a strain on diesel vehicle sales, with clear declining trends in Europe, South Korea and India. In 2018, sale of diesel cars will continue to fall as governments announce stringent air quality measures, including higher tax bands in Europe.

In contrast, it is green lights all the way for electric vehicles (EVs), with sales surpassing 1 million units for the first time in 2017. This momentum is expected to carry forward with sales hitting nearly 1.4 million in 2018. China will continue to reign over the EV market, accounting for 40% of all sales. Complementing the surging demand for EVs, investments in related infrastructure are also set to increase. EV charging stations will be a key focus area in 2018, especially for energy and petrochemical companies. Setting the wheels rolling in 2017, Shell bought out ‘NewMotion’, the largest electric charging station provider in Europe. Investments are also set to increase in lithium ion manufacturing in 2018 as automotive companies look at building in-house EV battery capabilities. EV prices that fell below $200 / KWH in 2017 are expected to fall a further 15-20%. The second life of batteries will grow as the residential energy storage market will top around 0.38 GHW on its way to a 1 GWH market by 2018.

Autonomous Cars Will Zoom Ahead

Hollywood’s fascination with driverless cars (KITT from Knight Rider, anyone?) seems oddly prescient as autonomous cars rev into top gear. So here’s my third prediction: autonomous cars are not just for movie screens anymore, they are here, they are real and they are just going to become more mainstream.

Major OEMs are expected to launch vehicles with Level 3 capabilities in 2018 following in the tracks of Audi, which will introduce its flagship 2018 A8 in early 2018. Last year also saw the emergence of artificial intelligence (AI) in autonomous drive testing and development. The next generation of supercomputers enabling deep learning AI for object detection, classification and decision making was introduced by Nvidia. Investments by automotive companies in autonomous vehicle development also increased with Ford and Volkswagen investing in ‘Argo AI’ and ‘Mobvoi’, respectively, and Toyota launching its subsidiary ‘Toyota AI Ventures’, focused on funding AI start-ups in the automotive space. Autonomous cars require a higher degree of data fusion and to support this, car manufacturers and Tier 1 suppliers are expected to move towards Ethernet in 2018.

And that’s not all. For those who can’t function without their own personal digital assistants, here’s some (‘siri’ously!) good news. All major car companies are expected to pursue a strategy of including AI personal assistants in their cars in 2018, as witnessed in the case of BMW integrating Google assistant into its cars in 2017. The company is set to integrate Alexa next in 2018 and has also partnered with Skype to develop a car-friendly version of the chat software. Meanwhile, Volkswagen is developing voice recognition and natural language processing apps in association with Mobvoi.

Digitization Will Open Up a New Era of Online Retailing, Data Monetization and New Business Models…for Cars!

Fourthly, I predict that digitization will open up new frontlines, growth opportunities and business paradigms—and this time it's the automotive industry that will be at ground zero of the digital disruption.

Online retailing will become the new combat zone for car manufacturers. Many of them, including General Motors, Hyundai, Tesla, Mitsubishi and Jaguar Land Rover, have started selling their vehicles online in certain regions, either through their own portals or through third-party aggregators. Ford has partnered with Alibaba in China to sell its cars online through the latter’s retail arm, Tmall, which is expected to commence in 2018.

Monetization of car data will be a key focus area in 2018. In 2017, the German auto industry tried to limit the access that third-party service providers had to data generated through the onboard diagnostics port. However, an EU regulation passed in December 2017 instructed car manufacturers to provide unrestricted data access to third-party providers. Business models such as Bartering, Brokering and Business Intelligence Service, centred on car data monetization, have already begun flourishing in the automotive space.

Usage-based insurance has also come to the fore, with car companies plumbing car usage data to arrive at optimal premiums for each vehicle. The Renault-Nissan-Mitsubishi alliance has already partnered with technology firm, The Floow, to deliver vehicle-generated data to insurance companies, enabling user-based insurance premiums.

The Mobility Space Will Head into Consolidation Mode and Automotive Companies will Invest in Flying Cars

And, my fifth and final prediction is that just on the horizon is a time when you might have your very own Chitty Chitty Bang Bang! Car companies will start looking at the 3rd dimension of travel – the skies.

The mobility space is entering a consolidation phase and 2018 will see the total number of participants in the carsharing, ridesharing, and e-hailing segments reduce. On the bright side, there is increased focus on EVs in mobility service fleets with close to 7 EV carsharing programs having been launched globally in the past year. The corporate carsharing market is fairly nascent but demand is expected to pick up in the medium term as policies change and governments place greater emphasis on sustainable transport solutions. Franchise-based business models, community-based carsharing programs, and car-sharing vehicles being rented to ride-hailing drivers are some key developments likely to define 2018.

The year 2017 will go down as the year when flying cars gained mainstream attention. The persistent buzz about flying cars resulted in a series of investments for the future. Toyota acquired Japanese flying car company Cartivator in May, followed by Geely acquiring Terrafugia in July, and Daimler investing in Volocopter in August. This interest is expected to continue in 2018, with companies making strategic, long-term investments to position themselves in this embryonic but rapidly evolving market.

Despite challenges such as the slowdown in vehicle sales in key markets and the realignment of trade pacts, 2018 is poised to be an exciting year for the automotive industry, building on the momentum gained in 2017.

Stay tuned for the future has arrived. 2018 will be an exciting year for the industry.